MBF302 TRADE FINANCE AND CMS MANAGEMENT

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ASSIGNMENT

DRIVE	FALL  2014
PROGRAM	MBABF
SEMESTER	III
SUBJECT CODE & NAME	MBF302 TRADE FINANCE AND CMS MANAGEMENT
BK ID	B1393
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

1. What is WTO? What are its objectives and principles? Explain the organisational structure of WTO.

Answer: The establishment of the World Trade Organisation (WTO) as the successor to ,the GATT on 1 January 1995 under the Marrakesh Agreement places the global trading system on a firm constitutional footing with the evolution of international economic legislation resulted through the Uruguay Round of GATT negotiations.

A remarkable feature of the Uruguay Round was that it paved the way for further liberalisation of international trade with the fundamental shift from the negotiation approach to the institutional framework envisaged through transition from

2. Define trade finance. Explain Working capital cycle and its stages using a diagram.

Answer: Working capital is that amount of funds which is required to carry out the day-to-day operations of an enterprise-whether big or small. It may also be regarded as that portion of an enterprise’s total capital which is employed in its short-term operations.

These operations consist of primarily such items as raw materials, semi-processed goods, sundry debtors, finished products, short-term investments, etc. Thus, working capital also refers to all the short-term assets known as current assets used in day-to-day operations of an enterprise.

Operating Cycle:

3. Describe the characteristics of factoring. What are the benefits of forfaiting?

Answer: Factoring is a financial option for the management of receivables.In simple definition it is the conversion of credit sales into cash. In factoring, a financial institution (factor) buys the accountsreceivable of a company (Client) and pays up to 80%(rarely up to90%) of the amount immediately on agreement. Factoringcompany pays the remaining amount (Balance 20%-finance cost-operating cost) to the client when the customer pays the debt.

4. Define commodity finance. What are the various types of commodity finance. Discuss the trade aspects of regulatory finance.

Answer: Commodity finance aims to provide short-term, self-liquidating finance facilities to a range of trading companies from the mid-sized specialist product trader to the globally-integrated major trading houses. These facilities may be secured or unsecured depending upon our perception of the creditworthiness of the borrower and the structure of the business we are undertaking. Our major business lines comprise steel and base metals, energy products and agricultural commodities. Generally we target business where there are liquid terminal markets for the underlying commodity, but we will also work selectively with market-leaders that trade less liquid commodities.

Q. 5.Explain the concept of formulating loan policy in a commercial bank.

Answer: While appraising loan proposals involving real estate, banks should ensure that the borrowers have obtained prior permission from government / local governments / other statutory authorities for the project, wherever required. In order that the loan approval process is not hampered on account of this, while the proposals could be sanctioned in the normal course, the disbursements should be made only after the borrower has obtained requisite clearances from the government authorities. Banks' Boards may also consider incorporation of

Q. 6. Define cash management services. Discuss the types of cash management’s services?

Answer: Cash management is the corporate process of collecting, managing and (short-term) investing cash. A key component of ensuring a company's financial stability and solvency. Frequently corporate treasurers or a business manager is responsible for overall cash management. Successful cash management involves not only avoiding insolvency (and therefore bankruptcy), but also reducing days in account receivables (AR), increasing collection rates, selecting appropriate short-term investment vehicles, and increasing days cash on hand all

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Send your semester & Specialization name to our mail id :

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